We wrote an article earlier this week, describing how Cannabis prices are falling across the US due to legalisation in some states.
Well, according to the Washington Post, Jonathan Caulkins, a professor at Carnegie Mellon University, and Steve Davenport of the Pardee RAND Graduate School recently aggregated price data on cannabis for the Washington Liquor and Cannabis Board and concluded that the cost of the cannabis is “now steadily falling at about 2 percent per month.”
“If that trend holds,” Davenport says, “prices may fall 25 percent each year going forward.”
Though the price of cannabis initially rose for the first few months following legalisation in Washington, Davenport attributes this to supply shortages as the markets developed and demand exploded. Since, both the retail and wholesale costs have “plummeted.” Though the retail cost of a gram spiked to $25 shortly after July 2014, by March 2016, the same amount cost slightly under $10. The wholesale cost also peaked shortly after legalisation, at just under $10. It is now $2.99.
Similarly, according to a survey conducted by global brokerage services company Convergex, prices of cannabis in Colorado have fallen since the state ended prohibition. As they reported in 2015, “Since last June, the average price of an 1/8th ounce of recreational cannabis has dropped from $50-$70 to $30-$45 currently; an ounce now sells for between $250 and $300 on average compared to $300-$400 last year.”
It is important to note that the above prices do not reflect prices in the UK, and we will continue to see inflating cannabis prices until we have a regulated system over here, with some bud imported from California and other parts of the US costing upwards of £30 per gram.
The Washington Post referred to Caulkins’ recent book, Cannabis Legalisation: What Everyone Needs to Know, to explain why cannabis is more expensive when it’s banned:
“Prohibition imposes many costs on drug producers. They must operate covertly, forgo advertising, pay higher wages to compensate for the risk of arrest, and lack recourse to civil courts for resolving contract disputes. Legal companies in contrast endure none of these costs and also can benefit from economies of scale that push production costs down.”
Though prohibitionists might rejoice at this dynamic under the assumption it will deter drug use, the costs of prohibition ultimately fall on taxpayers, non-violent users, and strained court systems, as well as victims of cartel violence in Central and South America. Indeed, as Anti-Media recently reported, legalisation efforts in the United States have weakened the power of drug cartels south of the border:
“A newly-released statistical report from the U.S. Border Patrol shows a sharp drop-off in cannabis captured at the border between the United States and Mexico. The reduction in weed trafficking coincides with dozens of states embracing cannabis use for both medical and recreational purposes.”
Further, “‘Two or three years ago, a kilogram [2.2 pounds] of cannabis was worth $60 to $90,’” a cannabis farmer in Mexico said in an interview withNPR at the end of 2014. “‘But now they’re paying us $30 to $40 a kilo. It’s a big difference. If the U.S. continues to legalise pot, they’ll run us into the ground.’”
As the Washington Post explains, the reduction in the cost of cannabis directly affects state coffers. On one hand, the drop in price amounts to reduced tax revenue. However, he notes, “bargain-basement prices undercut the black market, bringing the public reduced law enforcement costs, both in terms of tax dollars spent on jail and the damage done to individuals who are arrested.”
Considering legal cannabis is, by at least one measure, the fastest-growing industry in the United States, cannabis enthusiasts will likely continue to enjoy the benefits of policy reform. With the advent of cannabis restaurants, nightclubs, and resorts — and the unrelenting trend of legalisation in the US — the dwindling cost of cannabis provides a platform for innovation within the industry. And according to the experts, the costs will likely keep falling.
As Caulkins theorised:
“It’s just a plant. There will always be the cannabis equivalent of organically grown specialty crops sold at premium prices to yuppies, but at the same time, no-frills generic forms could become cheap enough to give away as a loss leader – the way bars give patrons beer nuts and hotels leave chocolates on your pillow.”